Back
14 Apr 2015
Has Draghi other motives with PPSP? – KBC
FXStreet (Barcelona) - The ECB might be taking on tasks of political policy makers, with KBC Bank viewing that the motive of Draghi’s purchase plan goes further than only pushing the euro-area inflation higher.
Key Quotes
“We think Mr. Draghi’s objective with the PPSP goes further than only pushing inflation higher. He probably wants to help the weaker economies of the euro area at a point time that sentiment hostile to EMU mounts fast, especially in bailout countries (and in Italy and even France).”
“This policy helps countries to finance their uncomfortably high debt loads still significant deficits relatively cheaply.”
“Does this fall within the ECB mandate? Or is the ECB doing the job of political policymakers? The ECB, doubtless with honourable motives, is taking on tasks that aren’t those of a central bank.”
“In the same spirit, one can also discuss whether banking supervision should reside with the ECB or a separate body. Indeed on a more fundamentally basic level, one may question whether unconventional policy is needed when inflation is negative due to the positive oil shock.”
“We also suspect that his policy aims to give markets a bigger place in the credit chain in the EMU as is the case in the US, at the expense of the traditional European banking system that until now accounted for the lion’s part of lending.”
Key Quotes
“We think Mr. Draghi’s objective with the PPSP goes further than only pushing inflation higher. He probably wants to help the weaker economies of the euro area at a point time that sentiment hostile to EMU mounts fast, especially in bailout countries (and in Italy and even France).”
“This policy helps countries to finance their uncomfortably high debt loads still significant deficits relatively cheaply.”
“Does this fall within the ECB mandate? Or is the ECB doing the job of political policymakers? The ECB, doubtless with honourable motives, is taking on tasks that aren’t those of a central bank.”
“In the same spirit, one can also discuss whether banking supervision should reside with the ECB or a separate body. Indeed on a more fundamentally basic level, one may question whether unconventional policy is needed when inflation is negative due to the positive oil shock.”
“We also suspect that his policy aims to give markets a bigger place in the credit chain in the EMU as is the case in the US, at the expense of the traditional European banking system that until now accounted for the lion’s part of lending.”